Government Policy and Aggregate Fluctuations
Keywords:
real business cycles, fiscal policy, monetary policy, stochastic growth model, technology shocks, cash-in-advance constraintAbstract
This paper investigates the effect of including fiscal and monetary variables in a simple real business cycle model. The starting point is the stochastic growth model with fluctuations driven by technological shocks. The growth model is first extended to include government spending and taxes on factors of production. A second extension imposes a cash-in-advance constraint on purchases of consumption goods. For the three models, equilibrium decision functions and predictions for second moments are compared.Downloads
References
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Copyright (c) 1991 Ellen R. McGrattan
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
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